Its result season once again and apart from announcing quarterly results, the companies also mull other corporate actions that may be lucrative for both the company and its shareholders. Likewise, there are 2 companies which shall delve on considering buyback.
Before knowing the details on the 2 companies'. Let us in brief why a buyback is considered by listed companies and what is a Buyback?
What is share buyback or share repurchase?
The buyback is a process whereby the company buys back its own outstanding equity shares in order to lower the number of shares in the open market. There can be a host of reasons for which a buyback may be initiated such as intention of increasing the value of outstanding shares by reducing their supply, distribution of extra cash or may be to reduce more number of stakeholders in an entity. Other probable reasons can be boosting financial ratios, changing capital structure etc.
The Bengaluru based company after failing investors with a smaller than expected dividend amount of just Rs. 150 per share has in a filing informed that the company's board meet will be held on January 14, 2022 for considering quantum as well as timing of buyback of shares of the company.
To be noted that promoters hold an over 67 percent stake in the company and hence will be eligible for a major share of the third interim dividend. So, the buyback route can be a step towards cheering retail investors.
Other than this the agenda of the meet shall be to consider and explore potential merger and acquisition opportunities. Remember previously the company also announced bonus share issuance in the ratio of 1:1 that failed to cheer investors and the stock on the following day post the announcement hit a 20% lower circuit. The stock in trade on January 11, 2022 gained 6 percent and closed at Rs. 3009.15 per share.
This is a well known and much awaited event at the company's earnings due to be released tomorrow. This will be the company's 4th buyback from 2017. Last year, the company. Last year, the company bought 53 million shares for an amount of Rs. 16,000 crore at a buyback price of Rs. 3000 per share. There is a view that the company shall buyback shares of the company at a premium of 10-20 percent spending Rs. 16,000 crore for almost 1% stake. The buyback size is considering the consistency the company has maintained in its last 3 buybacks.
The premium is suggested considering the stock's closing price a day before the buyback announcement.
Ahead of its results, interim dividend and buyback consideration, the stock of TCS last closed at Rs. 3915.9 per share. The stock of TCS trades just over 1.5 % away from its 52-week high price of Rs. 3989.9 per share.